Houston Strategies

Wednesday, February 28, 2007

Houston and Texas best NYC on wealth and taxes

New York is home to the most profitable and highest-paying major industry on the planet: finance. Wall Street bonuses are legendary in their extravagance. Yet a recent study by their own Independent Budget Office shows they have been far less successful in generating broad-based opportunity and wealth across their population. From the NY Times story:

New York, despite its high concentrations of wealth, is far from being the richest big city per capita, the report found. New York’s gross taxable resources — the personal incomes of residents and the gross operating surpluses (income less employee compensation) of businesses — averaged $61,622 per resident, trailing Dallas ($74,383), Houston ($72,835) and San Diego ($63,814).

The reason?

New York City has long had a notorious reputation for high taxes, but an independent analysis released today shows just how much the city stands out in this regard: state and local taxes swallow $9.02 out of every $100 in taxable income, putting New York’s tax burden far above those of the eight other American cities with populations over 1 million....In general, the cities with weaker tax bases — San Antonio, Philadelphia, Phoenix and Los Angeles — tended to have higher individual tax burdens than the wealthier cities of Dallas, Houston and San Diego. (Of the nine cities, Chicago was slightly below average in both per capita taxable resources and tax burden.) “New York City sits far outside the trend line,” the analysis found.

Of the nine cities compared, Houston had the second lowest tax burden of $5.53 out of every $100 in taxable income, just behind Dallas at $5.20. From the report:

In fact, as Figure 1 shows (see page 3), there is for the other large cities a fairly robust negative correlation between the strength of a city’s tax base (measured in per capita GTR) and its tax effort (collections per $100 GTR). Cities with weaker than average bases (San Antonio, Philadelphia, Phoenix, Los Angeles) tend also to have heavier than average taxes placed on those bases, while cities with strong bases (Dallas, Houston, San Diego) have relatively lighter taxation. (Chicago is just below average in both per capita taxable resources and tax effort.) But New York City sits far outside the trend line.

On a related note, talk of a state income tax pops up in Texas from time to time, but a recent Wall Street Journal op-ed noted that more and more states are trying to shift towards Texas' no-income-tax model:

If you're searching for the next big thing in American politics, it's wise to keep an eye on the states. Here's one possibility: the abolition of state income taxes.

In Georgia, Missouri and South Carolina, Governors and state legislatures are drafting serious proposals to repeal their income taxes to promote economic development. St. Louis, one of America's most distressed cities, may overturn its wage/income tax as a way to spur urban revival. And in Michigan, the legislature is in the last stages of phasing out its hated business income tax -- the most onerous in the land. "States are now in a ferocious competition to attract jobs and businesses," says economist Arthur Laffer, who is advising several Governors and legislators on the issue, "and one of the best ways to win this race is to abolish the state income tax."

...

The idea of financing state services without an income tax is hardly radical. Nine states today -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming -- manage well without one. With a few exceptions, the non-income tax states are America's most prosperous. Meanwhile, the high income tax states, which tend to be congregated in the Northeast, keep surrendering jobs, people, and voters to the South and West.

State lawmakers also seem to have learned from two of the most recent states to adopt an income tax: New Jersey and Connecticut. As recently as 1965 New Jersey had neither an income nor sales tax, but managed to balance its budget every year. Now it has both taxes -- its income tax is the 5th highest in the nation -- but the state is facing what Stateline.org calls a "staggering budget deficit." Allied Van Lines reports that the Garden State is now one of the leading places for people to flee.

The latest state to adopt an income tax was Connecticut in 1991, but a new report by the Yankee Institute reveals that the tax has been a calamity. The state has ranked last in employment growth since 1991, losing 240,000 of its native born citizens between 1991-2002. No other state has since enacted an income tax, and lawmakers in Georgia, Missouri and South Carolina say Connecticut is now the model for how not to run a state economy.

Whether these states will be able to eliminate their income taxes in the next few years is an open question. But what's undeniable is that the debate in state capitals has swung decisively in the direction of chopping income tax rates, not raising them.

Sunday, February 25, 2007

Immigrant entrepreneurship in Houston

A think tank in New York called the "Center for and Urban Future" has recently released a report on immigrant entrepreneurship, with a specific focus on New York, LA, Houston, and Boston (NY Times story). The Houston section is an easy 3-page read that starts on p.52, and highly recommended. A few Houston-specific excerpts from both the main report and the Houston section:

In Houston, a telecommunications firm started by a Pakistani immigrant topped the 2006 Houston Small Business 100 list, a ranking of the city’s most successful small businesses compiled by the Houston Business Journal. Additionally, a Houston-based energy company started by a Nigerian immigrant was recently named the second largest black-owned firm in the U.S. by Black Enterprise magazine....In Houston, 94 percent of the growth in businesses between 1995 and 2005 occurred among firms with fewer than 50 employees....Houston ranks third among all American cities in the number of Hispanic-owned businesses (41,753) and sixth in the number of Asian-owned firms (15,966). It is also home to 16 of the largest 500 Hispanic-owned firms in the country....There is evidence that fewer immigrant- and minority-owned businesses in New York grow to the next level than in other cities. For instance, of the 15 cities in the U.S. that have the most Hispanic-owned businesses, New York has the lowest average receipts per firm. The average Hispanic-owned company in the five boroughs earned just 37 percent as much as the average Hispanic-owned firm in Houston, 40 percent of the average in Chicago and 42 percent of the average in Miami. According to Hispanic Business magazine, only 11 of the nation’s 500 largest Hispanic firms (and just one of the top 100) were based in New York City in 2006, down from 13 in 2004. In contrast, 16 firms from Houston and 36 from Los Angeles County were on the list.

Similarly, New York City’s Asian-owned businesses took in a smaller amount of receipts, on average, than their counterparts in 13 of the 15 cities with the most Asian-owned firms. The average Asian-owned firm in New York earned 48 percent as much as a similar firm in Los Angeles, 57 percent of one in Houston, and 71 percent of one in San Francisco.

(I think a factor here is freeway vs. transit/pedestrian mobility: freeway mobility is generally faster and more flexible, allowing businesses to serve a larger area and a larger number of customers)...Houston has the largest Nigerian population in the U.S. and the third largest Vietnamese community. Hispanics, however, now outnumber all other groups in Houston, accounting for 37 percent of the city’s population (Anglos make up 31 percent, blacks 25 percent and Asians/others 7 percent)....Another particularly vivid illustration of Houston’s recent immigration influx has been the inexorable expansion of Houston’s thriving Asian business district along Bellaire Boulevard. Once a barren and rundown area, it’s now the largest Asian business district in the South, and still growing. Today, several hundred Chinese and Vietnamese businesses line strip mall after strip mall for miles along this sprawling district, with new shopping centers seemingly going up every month....Immigrant entrepreneurs have thrived in Houston for many of the same reasons as other small business owners in this commerce-friendly city: a surplus of inexpensive real estate, no zoning restrictions, relatively low labor costs and affordable housing. All of this makes it relatively easy to open and expand a business, according to local business leader Tim Cisneros. “Houston may be America’s last frontier of true opportunity,” he says. “Immigrants feel welcomed.”

Indeed, Houston has the fourth-highest rate of entrepreneurial activity among the nation’s 15 largest metropolitan areas, behind only Atlanta, Riverside/San Bernadino, CA and San Francisco, according to a 2006 report by the Kauffman Foundation.

Nevertheless, immigrant entrepreneurs in Houston encounter similar obstacles as those in other cities, from language barriers to financing roadblocks. One drawback more unique to Houston is that it doesn’t have nearly as extensive a network of business assistance services available to entrepreneurs—offered by either nonprofits or the local government—as cities like New York and Los Angeles.......too few immigrant entrepreneurs in Houston make use of the city’s One Stop Business Center, which she heralds as a tremendously useful resource for individuals looking to start a business. “Very few people know it exists,” says Brooks. “They give you a list of permits you need, the cost of those permits, what standards you need for day care, home health agency, a salon or a restaurant. It tells you all the stuff that you need. But the city of Houston doesn’t advertise it. One percent [of all immigrant entrepreneurs] know to go down there to get this information.”

If we're doing so well without the support resources, imagine the incredible potential if we had them and more people knew about them...

Thursday, February 22, 2007

Big plans for 288, but it could be better

Just got back from TXDoT's public meeting on 288 improvements. Unfortunately I didn't get as long as I'd like - I got there at 7:45, and you'd be amazed how fast they shut down the place at 8pm sharp. Generally good news, although I think there's one or two flaws in their plan. First the good items:

4-lane EZ-tag toll road down the median of the existing 288 (almost certainly with congestion pricing)

They were very clear to emphasize there will be no tolling on the existing mainlanes

New ramps at 610 and Beltway 8 that cleverly combine together traffic from both the free and paid lanes (right exit in the toll lanes, left exit in the free lanes)

A particularly cool feeder into the Medical Center: northbound 288 will have a 3-lane exit (!) to 610 westbound. If you stay in the right lane of the exit ramp, it will curve off along the median of Almeda, crossover Holly Hall, and then merge you into Almeda.

It also seems well designed to take outbound Med Center traffic south on Fannin, Cambridge, or Almeda, get it onto 610 eastbound and then a ramp with choices into either the free or tolled 288 southbound lanes

Current plan is construction start by 2010, with completion in stages between 2012 and 2014

Right now the tolled lanes stop just before 59, but the expert we talked to said there is a long-term master plan to connect them up past downtown, to Hardy/45. It was very vague. I have absolutely no idea how that would work other than a tunnel.

There seemed to be one substantial flaw in the plan (at least that I was able to catch with only ten minutes of looking at the posters and talking to one of their experts): if you're commuting out of the Med Center along MacGregor, Holcombe, or OST, and get onto 288 southbound, you're stuck in the congested free lanes until at least a mile or two south of 610 before you have an option of getting into the paid lanes. There seems to be room to offer an exit lane to let you get into the tolled lanes before 610, but they don't have it in the plans. If that concerns you, send an email to hou-piowebmail@dot.state.tx.us before March 9th if you want your comments to carry official weight. I will be doing exactly that.

I do have one other, "bigger picture" concern. 288 is about as single-directional as freeways get in Houston - almost all the traffic is inbound in the mornings, and outbound in the evenings. There aren't a lot of jobs in Brazoria County, and even for the ones there are, not too many of those workers commute south from Houston. That means half the toll road is likely to be pretty much empty at rush hour (why ride in the toll lanes when the counter-flow free lanes are free-flowing?). That's a waste. It seems like it would make more sense to build four (or more) reversable one-way lanes - all inbound in the morning, and all outbound in the evening. I know this is a complicated engineering problem, but it really would get a lot more utilization and ultimately bring in more toll revenue. And it's not that crazy when you think about it. If you look at the amount of land available for development out there, eventually it could easily support 7-8 lanes of capacity in the rush hour direction. When you think about it, that's about what we have in the 45/Hardy corridor, and it's close to what we'll have in the more bi-directional new Katy corridor. If I were Brazoria County officials and I wanted growth and economic development like Ft. Bend or Montgomery Counties, I'd take a serious look at pushing TXDoT to do more reversable one-way capacity than two-way.

Tuesday, February 20, 2007

Planning bureaucracy runs amok, picks porn over a church

I have to pass along this article from the Wall Street Journal's offbeat front-page center column, which reveals the dark comedy of out-of-control city planning bureaucracies, a recent topic on this blog here and here (highlights mine).

SAN FRANCISCO -- When the National Guard left this city's historic State Armory and Arsenal building in 1975, the big Moorish castle fell into disrepair. Today, it has a controversial new lease on life.

Over the years, developers suggested turning the 1914 building, which is a mile from City Hall on the edge of the Mission District, into a church, storage space or an apartment complex. But proposals kept getting shot down, many of them falling victim to the city's powerful Planning Department and a thicket of zoning rules. Developers joked that the 200,000-square-foot Armory, which is on the National Register of Historic Places, was cursed.

It turns out there was an easy way to preserve the Armory that doesn't run afoul of San Francisco's planners: make pornography there. In December, Peter Acworth, chief executive of the Internet porn company Kink.com, bought the landmark building for $14.5 million. Last week, Kink began shooting bondage films at the site, and the Planning Department doesn't have a problem with that.

...

The Armory is also zoned for "heavy commercial" use. Real-estate developers need special permission to build, say, condos or a church. Making films -- even dirty movies -- is OK. Tim Frye, a city planner who helps oversee the Mission neighborhood, says he found no reason to block the sale of the Armory to Kink. "Film production is a very sympathetic use" of the building, he says. "What happens in there is a private matter."

Mr. Acworth's fait accompli has now sparked a heated debate overSan Francisco's real-estate planning maze. Developers complain that outdated rules make it a nightmare for mainstream businesses to build in the most desirable parts of the city. Nonprofit groups gripe that planners are so focused on economic growth that the city sacrifices affordable housing. Some merchants say San Francisco's government cares only about its wealthier neighborhoods and lets just about anyone enter the Mission, a formerly low-income area that has lately filled with bars, restaurants and young hipster residents. Mission District activists are planning a protest this week.

The flap has drawn in the mayor, Gavin Newsom. Last week, Mr. Newsom announced plans to hold a community meeting to discuss use of the Armory and revisit city-planning rules. "I'm not going to moralize it, but I don't think this is the appropriate place" for a porn film studio, says the mayor, who recently admitted to having an affair with his re-election campaign manager's wife. "This is a city with a housing crisis, and now here we are with an adult studio near schools?"

...

Amit Ghosh, director of the city's Planning Department, has publicly said, "The planning code...is not really worried with moral propriety."

Mr. Acworth says he was surprised things went so smoothly for Kink at the Planning Department. "It's kind of funny that it's porn that has got everyone thinking" about how the planning rules should change, he adds.

Classic. Next time somebody tells you planning and zoning will protect their neighborhoods, go ahead and trot out this little story in the "be careful what you wish for..." department.

Sunday, February 18, 2007

In-migration, maps, crime, monorail, and housing affordability

Finishing off the small miscellaneous items I wasn't able to get to at the beginning of last week:

On an absolute numbers basis, Texas is attracting the second-highest inbound moving vans minus outbound moving vans according to United Van Lines, just behind North Carolina. They also look at inbound-to-outbound ratios, where we drop to #16. Most of the rankings made sense to me, with the exception of Florida, which somehow has slightly more outbound than inbound - not what I would expect in such a fast growing state. Might be a temporary reaction to the 2005 hurricane season.

Continuing on our popularity, I was surprised to find Houston in the top 8 most popular cities being researched at Sperling's Best Places, along with Portland, Austin, Seattle, Denver, Atlanta, San Diego, and Phoenix. Surprised DFW wasn't there, but that may be more of a multi-municipality problem (people researching Dallas and Ft. Worth separately) that an actual lack of popularity.

Some very cool 3D maps of the world with mountain ranges/spikes based on economic activity. Houston has a very nice spike, although it's based on ancient 1990 data.

A NY Times story on the collapsing ridership and rapidly deteriorating financial position of the privately-owned Las Vegas monorail. From the map, it looks like it runs on the same route where an older, slower monorail used to run when I was in Vegas many years ago. I remember it being incredibly inconvenient and painful to use, because it dropped you off at the back of each casino, and the casino has a strong incentive to trap you there, rather than giving any easy or clear route to the Strip. You could easily spend 10-15 minutes just trying to navigate through the casino. At that point, you probably would have just been better off with a front-door to front-door ride in a taxi, or even just walking the Strip. Their solution is to try and double-down by extending the line to the airport, which is considered very financially risky.

Demographia has released their 3rd Annual International Housing Affordability Survey. Their basic statistic is the median home price divided by the median income, with a healthy level being around 3. Houston has a very nice 2.9, and gets some praise in the report. Much of California is a crazy-high 8 to 11. England and Australia also have very high ratios. Definitely worth a browse. (thanks to Hugh for the heads up)

Thursday, February 15, 2007

Mineta, Spillette, and Eckels' last dance

Three topics today. The first is former Transportation Secretary Norman Mineta, who I was able to see speak at the Houston Forum on Tuesday through the generous invitation of Neal Carlson. He spoke generally about the transportation crisis in this country, but also about a few Houston specifics:

Traffic congestion costs Americans $200 billion per year, or about 2% of GDP

2.3 billion gallons wasted in 2003, which created 20 million tons of carbon dioxide

The growth rate of our productivity has been dropping lately, in part due to congestion

Mentioned the President's congestion pricing initiative, with $175 million set aside in the budget, and Houston is aggressively going after that money

Also mentioned we are in nonattainment with the Federal Clean Air Act, and may lose federal transportation funds starting in 2009

I questioned him about congestion-priced EZ-tag lanes on federal highways, and he said it was recently authorized in a 2005 act. He noted that the gas tax revenue is flat, and inadequate to our needs, so tolling is our best solution. So it sounds like, legally, there's not much preventing us from building an extensive high-speed lane network using converted HOV lanes and left-lanes of existing freeways (inc. 610).

Second, if you didn't catch it, read city planner Steven Spillette's interview with the Chronicle's Nancy Sarnoff on the urban corridors initiative. They want to get more urban-style development along Metro's major GRT transit corridors.

We're looking at revising those that would facilitate different types of development than what we've traditionally had in Houston — especially with an eye toward the idea of having high-quality pedestrian-oriented districts that typically have a mix of uses ... and make it possible for these projects to proceed a little earlier, without having to get the types of variances they normally would have to obtain from the city.

A lot of our peer cities have been getting these projects done, and they're already on the ground. We've yet to have them developed, and we want to make sure we're not delaying them or introducing obstacles that would keep more developers from proposing them. ...

We're looking at how we might modify setback requirements. A truly walkable environment will typically have buildings that front directly to the sidewalk and have a main entrance onto the public sidewalk, as opposed to be being separated by a parking lot or having an entrance in the back of the building. We'll be trying to look at alternative parking arrangements so that we don't end up with the typical sea of parking lots. ...

We're looking to try to have the main set of community workshops in April. ... We're hoping to have proposed ordinances and infrastructure and policy modifications presented to the planning commission and going through the City Council and getting adopted by this summer.

I've spoken with Steve quite a bit about this and other topics, and he's very practical, realistic (especially when it comes to accommodating cars), and really understands the realities of the development market in Houston. If anybody can figure out how to get this kind of development done in Houston with a light touch while avoiding heavy-handed regulations and staying true to Houston's no-zoning/free-market DNA, it's him.

Finally, we have Judge Eckels' State of the County address today at a luncheon put on by the Greater Houston Partnership, who generously invited me as part of the media. The Chronicle has their early story on it here. Of course, the big news is that Eckels announced he will be stepping down as Harris County Commissioner as soon as they can agree on a replacement. It sounded like he wanted to leave earlier, but Katrina and Rita got in the way. It's a little unclear to me if he's permanently going to the private sector, or just until he runs for something new in 2008 or 2010. He's been a commissioner for 12 years, and GHP President Judge Jeff Moseley noted that, when you include positions before that, he's served a continuous 8,802 days of public service. Wow. Impressive. He got choked up at the very end - it was clearly a very emotional moment for him, and he got at least two standing ovations. Clearly, he has plenty of popularity to run for other offices if he so chooses.

The rest of his speech was a long list of impressive accomplishments by the County (it should get posted here at some point). We do seem to have a remarkably competent and effective county government compared to most of the nation. The part most interesting to me was on toll roads, where he noted that the Grand Parkway and 290 tollroads have been held up for quite a while by TXDoT "negotiations" (more like extortion, in my book). He noted that HCTRA can build toll roads for 30% less than the private sector through the lower cost of money with tax free bonds and limits on liability. He called on TXDoT's new commissioner from Houston, Ned Holmes, to "get to work" on resolving the deadlock, although he was conspicuously absent from the extremely long list of local officials attending. Not a good sign. But, for what it's worth, every local official in Houston should be leaning on him - and the Legislature, and the Governor - to get this fixed fast so we can get back to addressing Houston's growing mobility crisis ASAP.

Update: Chronicle front-page, full-length story today on Eckels and his potential replacement.

Tuesday, February 13, 2007

The Myth of Superstar Cities

Joel Kotkin had a major op-ed in the Wall Street Journal today on "The Myth of Superstar Cities" (permalink). They promoted it on the front page, and it even got Richard Florida of creative class fame riled up. Here are some key excerpts, especially those relating to Houston.

Over the past 15 years, it has been opportunistic newcomers -- Houston, Charlotte, Las Vegas, Phoenix, Dallas, Riverside -- that have created the most new jobs and gained the most net domestic migration. In contrast there has been virtually negligible long-term net growth in jobs or positive domestic migration to places like New York, Los Angeles, Boston or the San Francisco Bay Area.

What as much as anything distinguishes elite places -- what Wharton real-estate professor Joe Gyourko calls "the superstar cities" -- are their absurdly high real-estate prices. New York, Boston, San Francisco and Los Angeles have long been more expensive than, say, Dallas, Houston or Phoenix -- but in recent years the difference in price, he calculates, has increased beyond all reason. San Francisco prices since 1950, for example, have grown at twice the national rate for the 50 largest metropolitan areas.

This is good news for those who hold property, but has been less than a blessing for those middle-class families who might want to enter these markets. In some superstar cities less than 10% of households can afford a median-priced home. Nationally the average is about 50%.

Mr. Gyourko traces these surging prices to two basic causes. First, there remains in superstar cities a remarkable concentration of very high-earning families who can bid up real estate. The second factor lies with the regulatory and tax regimes, which greatly limit the production of housing and job opportunities, particularly for middle-income families, not only in the city cores but in surrounding areas.

...

So what about the rest of the hoi polloi -- what is their urban future? For the most part, sadly, not in the "superstar" cities. Middle-class people have been fleeing the expensive cities for more affordable ones for a generation, and the migration has continued as the price differentials have grown.

Fortunately the jobs are headed in the same direction. After all, companies depend not only on elite MBAs but upon on the collective skills of middle managers, technicians and skilled laborers. Most companies also tend to be more mindful of basic costs, taxes and regulations than the average hedge-fund manager or trustafarian.

This perhaps explains why the largest companies -- with the notable exception of Silicon Valley -- have continued to move toward the more opportunistic cities. New York and its environs, for example, had 140 such firms in 1960; in 2006 the number had dropped to less than half that, some of those running with only skeleton top management. Houston, in contrast, had only one Fortune 500 company in 1960; today it is home to over 20. Houston companies tend to staff heavily locally; this is one reason the city was able to replace New York and other high-cost locales as the nation's unchallenged energy capital. Another example of this trend is Charlotte's rise as the nation's second-ranked banking center in terms of assets, surpassing San Francisco, Chicago and Los Angeles, indeed all superstar cities except New York.

The non-superstar cities have become the nation's most prodigious centers for job creation. Between 1990 and 2006, job growth in Las Vegas averaged over 6% annually; Phoenix and Riverside well over 3%; Houston, Atlanta, Dallas and Charlotte right around 2%. New York City, L.A., Boston, Chicago and San Francisco all remained well less than 1%.

Since 2000, these divergences have, if anything, actually widened. One reason is that superstar cities have continued to hemorrhage prodigious numbers of blue-collar jobs, including in fields such as manufacturing and warehousing that once sustained many urban working-class families.

To be sure, the superstar cities still likely boast far more high-six- and seven-figure incomes in finance and other business services. But in any industry this covers only a relatively small minority of workers. Overall, according to data collected by Pepperdine University's Mike Shires, the average real income -- after factoring in taxes and the cost of living -- of workers in professional business services is actually higher in places like Phoenix, Denver, Houston and Dallas than in the pricey environs of San Francisco, New York, Boston or L.A.

Some urban boosters see these shifts to the high end as evidence of superiority. After all, they argue, only the "best" remain, while immigrants, the poor and ordinary middle-income slobs migrate out to the suburbs and other less elite regions.

Yet, even here, the demographic trends are not nearly so promising. Over the past decade college-educated workers -- who once disproportionately migrated to the superstar cities -- now appear to be tilting instead to more affordable, family-friendly places. Since 2000, Riverside, Phoenix, Charlotte, Las Vegas and Dallas all have been among the big net gainers with such migrants. In contrast New York, Boston, L.A. and even the Bay Area, a big winner in the 1990s, appear to have become among the highest net losers. The big outlier here, as in many things, is Washington, D.C., where an ever expanding federal government and its satellites continue to draw in ever more educated workers.

Another intriguing shift is taking place among immigrants, the group who did much in the 1990s to help reverse demographic and economic decline in places like New York. Recent census data suggests they are increasingly likely to move to more affordable, business-friendly places such as Houston, Dallas, Charlotte and Phoenix.

...

This is something of an oddity, where the fashionable "left" defines successful urbanism by its ability to lure the superaffluent, the hypereducated and the avant garde -- or what Dr. Florida calls "the greatest number of the most skilled people." One wonders what true progressives like Harry Truman or Fiorella La Guardia would think of such an approach.

La Guardia or Truman understood that great cities become so, in large part, due to the strivings of the upwardly mobile middle class and families, not the elites of any stripe. It may well be true, as Mr. Gyourko argues, that as the nation grows to 400 million or more there could be a niche for 10 to 20 such "productive resorts" serving as "enclaves of the wealthy." But the urban future -- today as in past generations -- will belong mostly to places that continue to draw and nurture the middle class, which has driven the rise of most successful capitalist cities.

Hear, hear. If you're interested in my humble take on Superstar Cities (with only slightly less publicity and readership than the Wall Street Journal ;-), I did a whole week of posts on it last month you can find here.

Sunday, February 11, 2007

TXDoT scandal, rail, roads, rss, and more

The miscellaneous queue has finally hit critical mass, so much so that I'm going to have to break it up into two separate posts. But a couple items before we get to the list.

First, if you use a news reader, Houston Strategies now has an RSS feed link (Atom), which you can find in the right-side column under Links. I checked this option in the Blogger admin from day one of this blog, but recently realized that, even though the link has been active, Blogger didn't automatically put it anywhere on the page, so I manually added it.

Second, is some hot inside information to pass along on a scandal at TXDoT. This blog seems to have enough readership now that people send me tips from time to time, and this one has requested anonymity for obvious reasons, but I believe it to be a reliable inside source:

I caught wind of a pretty big deal at TxDOT today.... Looks like TxDOT underallocated state gas tax revenue to Houston, Dallas, Arlington and San Antonio and spent the $$ to build roads down near the border. It appears they owe Houston about a billion dollars from this underallocation over the past six years. The top Texas Transportation Commissioner is under fire, creating lots of momentum for the anti-concessionnaire movement in Texas. Story is slowly leaking.

A billion dollars is no chump change. Looking forward to coverage of this in the big media...

On to our miscellaneous list of smaller items:

If you didn't catch Robin Holzer's Sunday Chronicle op-ed responding to Congressman Culberson on the Metro Uline, be sure to give it a read (permalink with the fancy map). Very well argued, and makes a compelling case for running the line on Richmond as far as Greenway Plaza before jumping over to Westpark. You have to hope petty politics doesn't force a boneheaded routing decision that will hobble our core transit network for decades. Let your voice be heard!

Speaking of mobility infrastructure investments, I hope you caught Nancy Sarnoff's Chronicle piece last week on the real estate development projects blossoming along the under-construction Katy Freeway. It goes to show that freeway widenings with eminent domain and right-of-way expansion can also renew an area, vs. the "conventional wisdom" of "economic devastation." Surprise, surprise - it's even spawning some mixed use developments. Mobility and access begets vibrancy.

Ashley Cecil calls herself the "painting journalist," and has recently visited Houston and done a series of paintings worth browsing on her blog. Just search the page on the word "houston" to find all the relevant posts.

Well, since transportation seems to be the major theme of this post, we'll end on a little transportation humor from The Onion, "Urban Planner Stuck In Traffic Of Own Design". It's urban-geek humor, but I laughed hard. So much of trendy urban planning these days seems to be anti-car, and the comeuppance is well deserved.

Thursday, February 08, 2007

Planning debate with Councilman Peter Brown plus Metro stats

Today I had the privilege of being an "adjunct faculty" member at a Leadership Houston day on quality-of-life issues in Houston. After watching a great presentation by Ann Lents on all the excellent quality-of-life project(s) momentum building around town, my role was to engage in something like a moderated debate with Councilmember Peter Brown and Reason senior policy analyst Leonard Gilroy on the planning issues that had come up in our op-eds a few weeks back. Actually, I objected to the term "debate", since I prefer to be more consensus and solution oriented, so they renamed it to a "Fierce Conversation" - not really what I had in mind. In any case, it was a lot of fun, with the very engaging Joe Allen moderating. We did it in front of about 50 Leadership Houston people from their 25th class at the Hermann Park Old Club House.

From my perspective, the most important revelation from the whole event was that Peter Brown is not calling for land-use regulation, a very heartening discovery on my part. Joe, our moderator, then made the very incisive point/question: if we're all in agreement that planning is necessary for transportation, drainage, and infrastructure of all types (and that is currently being done), and we also agree land-use planning is bad idea, then what exactly is Peter Brown calling for? It turns out his chief concern is one we can all pretty much agree on: different agencies need to do a better job at coordinating their plans, both within the city and across the county and region. He rolled off a litany of coordination failures that have cost taxpayers millions of dollars. No arguments here - maybe HGAC and/or the CoH Planning Commission can do more to coordinate a broader array of plans across our region.

Peter also listed several specific issues he supports, but I did not have time to respond to. One of the nice benefits of being a blogger is I can do so here.

Stronger historic preservation: I can support this on a limited basis, mainly with incentives. The Mayor seems to be taking the right tack. There are risks here, and strong arguments that the public should be willing to pay for it if they want it that bad. The arguments are well debated in the comments here.

Limit density in neighborhoods with inadequate infrastructure (mainly sewer/water). You've got to look at the potential increase in the property tax revenue stream and see if it's enough to cover the cost of the infrastructure upgrades. Joe talked about developers paying for the infrastructure upgrades and getting reimbursed from TIRZ incremental property tax revenues. This is a great solution, because it puts the risk on the developer: if the development is not successful and doesn't generate the expected property tax increases, he doesn't get reimbursed and eats the cost. But even without such a structure, I imagine if you looked at the before and after tax streams from all the new townhomes and apartments/condos in the core of Houston, it's probably more than enough to cover needed infrastructure upgrades (on an NPV basis), especially if you consider that most most of those new residents don't have children we have to pay to educate, so their school taxes are pure gravy for HISD and the city as a whole.

Brownfields are not getting redeveloped. His proposal seems to be to limit densification in many parts of town where it's happening so as to push it to these brownfields. I really don't think it works that way. My understanding is that the vast majority of these brownfields are in less than desirable parts of town on the north, east, and south sides of town - mostly outside the loop. They're not getting developed because of a simple lack of demand in those areas, and limiting densification in the core will not really change that. They need to be redeveloped by the community groups that do affordable housing, and I think many of them are.

He complained that big developers won't come to Houston because our real estate environment is "too unpredictable". He talked about the mixed use projects in Dallas and Atlanta. Amusingly, a participant came up to me afterward and suggested I title this blog post, "Peter Brown likes Dallas better than Houston", but I wouldn't want to wreck that kind of voter havoc on Peter's political career ;-) I would suspect the real reason is not our "unpredictable" environment, but the stiff development competition here which keeps margins very tight. Big $ real estate developers prefer cities with tougher planning, regulatory, and development environments where they can muscle through the red tape and then be insulated from competition for the big returns.

I'm sure I'm cramming too much in one post, but there was also a short presentation by Metro Chairman David Wolff later in the day at the event. I took some notes I thought I'd pass along.

The Main St. light rail line has 7,000 riders per day per mile, which is #1 in the nation out of 29 systems.

40% of those riders are new to Metro (not formerly bus riders).

The University line is on a schedule about 1-2 years behind the other lines. One year behind in planning, but 2 years behind in estimated completion (Dec 2012 vs. Dec 2010).

We have the largest HOV lane network in the U.S., over 100 miles, and it moves the equivalent of 24 freeway lanes worth of people

Park-and-Ride has 25 lots, 31,000 parking spaces, and served 8.5 million riders in 2006.

They're using a new town-center public-private model for park-and-rides which is very cool, starting with the new Cypress P&R. There will be lots of pedestrian accessible shopping as you transition from your car to the bus and vice-versa.

Their light rail accident rate has substantially improved, and their overall bus rate of 0.75 accidents per 100K miles is impressive. I'm pretty sure I couldn't drive a bus on Houston's crowded streets for 100,000 miles without hitting something.

Overall, I think he's got Metro on a pretty good track (so to speak). Right before I left I also got to see some compelling presentations by CoH Elena Marks on air quality (ozone on the right track, but we have to do more on toxics like benzene) and Mary Ellen Whitworth on bayou preservation, both of which are doing great things for Houston and our quality of life (Harris County prison labor to clean up and restore bayous - brilliant!) - but I just can't stretch this post any longer. Have a great weekend.

Tuesday, February 06, 2007

The President pushes congestion pricing

From the Wall Street Journal this week, an article about President Bush's push for congestion pricing in his new budget.

In his annual budget blueprint to be unveiled today, Mr. Bush intends to showcase a highway "congestion initiative," according to White House documents, with grants for state and local governments to experiment with anti-jam strategies.

... a plan depicted by administration officials as "congestion pricing." The administration will award $130 million in grants starting this spring to help cities and states build electronic toll systems that would charge drivers fees for traveling in and out of big cities during peak traffic times. The money also could go to other congestion strategies such as expanded telecommuting, but administration officials make it clear they think congestion pricing is the most powerful tool they have. The White House will seek an additional $175 million for congestion initiatives in next year's budget.

...transportation officials have armed themselves with studies suggesting that traffic itself is becoming a big hidden tax on businesses across the country, as well as the No. 1 quality-of-life concern in many urban areas.

Congestion pricing "is a lot cheaper than the way we're paying now ... with time, unreliability, psychological hell," said Tyler Duvall, DOT's assistant secretary for policy.

The DOT estimates the total cost of U.S. congestion at about $200 billion annually, or almost 2% of GDP, counting wasted fuel, delays, environmental costs and increased inventory needs.

The White House, under fire for failing to embrace a more aggressive global-warming policy, is portraying the plan as part of a climate change strategy. Administration documents estimate that "travel delay ... wasted 2.3 billion gallons of fuel" in 2003, a total that "accounts for more than 20 million metric tons of carbon dioxide emissions."

In cities and regions that have adopted congestion-related fees, the most common approach is to offer solo commuters the choice of paying during rush hour to travel in the high-occupancy lanes reserved for car-poolers. Some tolls on existing turnpikes also have been adjusted higher for rush-hour travel.

...

The Bush administration is distributing $130 million in grants to help cities build the electronic systems needed. Department of Transportation officials expect more than 10 major cities to apply before the April deadline. (If you know Houston officials that might initiate such an application, please forward this post to them. Thanks!)

...

Even a 5% reduction in traffic jams can increase traffic speeds by as much as 50%, says Mr. Duvall. DOT officials figure a typical big-city traffic jam can be cleared with tolls of as little as $2 to $2.50 a day, if all lanes on a big highway are charged. But on some Southern California highways where fees are charged only for the former high-occupancy lanes, prices at the peak of rush hour have reached $8.50.

Congestion pricing has already taken hold in Europe, and the success of a congestion pricing system for London's roads three years ago motivated U.S. officials and major businesses to consider the idea. Voters in Stockholm approved a similar plan in September, after a test run during the summer.

The article included the table below showing how Houston's ongoing transportation infrastructure investments over the last two decades have kept congestion growth well below most major cities. Also note that extensive commuter rail transit investments have not relieved congestion in Chicago, DC, or San Francisco - a benefit that is commonly promoted with commuter rail proposals.

My proposal would be for Houston to be very aggressive going after this money to convert the left lanes of most our freeways to congestion-priced EZ-tag lanes (this would be in addition to Metro's HOV lane conversions), while letting commuter buses and vanpools use the lanes for free. Having a comprehensive network of high-speed lanes to all our job centers (not just downtown) would go a long way towards encouraging car/vanpooling and transit ridership. More details here.

Sunday, February 04, 2007

Reason on congestion, amenities, transit, and Houston

There have been a lot of interesting items out of the Reason Foundation and their Out of Control blog lately, which has a major initiative going on urban mobility. I thought I'd roll highlights from several items into a single post today.

A point I've made for a while is that mobility directly affects a city's ability to support diverse amenities (like theaters and exotic restaurants) and charities. When people have a hard time getting around, they stop supporting these entities, and the city is a poorer place for it. Los Angeles now seems to be facing these exact consequences of nation-leading congestion.

"Bottom line: In spite of decades of spending far more on transit per user than on roads, transit carries less of the traveling public every year. New York is the only urban area where transit carries enough people to make it a really significant part of the system. The painful thing is, this is caused by bad transit policy. We spend absurd proportions of our transportation dollars on transit systems designed not to served transit users, but to try to get people out of their cars--especially light rail projects. By every meaningful empirical measure, this has not worked. Transit's niche in urban travel and transit riders would be far better served by high quality bus transit services that include bus lanes that keep express busses out of traffic. To whit, virtual exclusive busways using a HOT lanes network, integrated with quality network buses services. The billions spent on light rail projects could deliver very nice, attractive, efficient, high quality bus transit and make everyone better off."

(I personally still support most of Metro's core L/B/GRT network for a whole host of reasons that have been discussed here before, but believe Reason is dead-on when it comes to express buses and HOT lanes instead of commuter rail for the modern, decentralized city)

They've recently released a book titled "The Road More Traveled: Why the Congestion Crisis Matters More Than You Think And What We Can Do About It" By Ted Balaker and Sam Staley, with an overview and list of 10 steps to congestion relief posted here. I'm happy to say Texas and Houston are pursuing most of the measures listed, although I would like to see us try more creative construction (like tunnels), more cash-out parking, more telecommuting, and more one-way streets in Uptown like downtown.

Finally, Sam Staley, one of the co-authors of that book, said some nice things about Houston in a recent interview on "Decongesting America" for the Pittsburgh newspaper:

Q: Where are the success stories in other cities or other countries that have cut traffic congestion in smart, efficient ways?

A: The most effective and the most important example in the United States is Houston, Texas. Houston has had rapidly increasing congestion as a large result of its rising population growth. It has added new capacity (by widening freeways), but more importantly it has added new capacity by converting high-occupancy-vehicle lanes to tolled lanes that also allow single-occupant vehicles. So what they are able to do is begin to guarantee free flow on certain lanes and they can do that through the toll.

Houston is also an important example because in adding capacity and actually reducing congestion, they have also created a more competitive and viable environment for mass transit. It's one of the few metropolitan areas where we have seen highway capacity has improved, congestion has declined but transit opportunities have increased as well. So the idea that road building has to be done at the expense of transit is not true and we see the proof of that in Houston.

Thursday, February 01, 2007

Size matters

On his blog, Richard Florida has passed along a very compelling concept from the Santa Fe Institute published in Harvard Business Review's breakthrough ideas of 2007. It makes a great case for why city size - and therefore growth - matters. Here are the key quotes/excerpts:

"By almost any measure, the larger a city’s population, the greater the innovation and wealth creation per person." ...

Executives talk about their companies’ “DNA” and roles in “business ecosystems,” but the analogy to living organisms is more than metaphorical. Like the mathematical laws governing how organisms’ metabolism, growth, evolution, and mortality depend on size, there are rules that appear to govern the growth, performance, and even decline of cities and other social organizations. Although we can’t yet predict how specific cities or companies will evolve, we’ve found general mathematical relationships between population size, innovation, and wealth creation that may have important implications for growth strategy in organizations.

In biology, different species are in many ways scaled versions of one another. Bacteria, mice, elephants, sequoias, and blue whales may look different, but most of their fundamental characteristics, including energy and resource use, genome length, and life span, follow simple mathematical rules. These take the form of so-called power-law scaling relationships that determine how such characteristics change with size. For example, metabolic rate increases as the ¾ power of mass. Put simply, the scaling law says that if an organism’s mass increases by a factor of 10,000 (four orders of magnitude), its metabolic rate will increase by a factor of only 1,000 (three orders of magnitude). This represents an enormous economy of scale: the bigger the creature, the less energy per pound it requires to stay alive. This increase of efficiency with size—manifested by the scaling exponent ¾, which we say is “sublinear” because it’s less than one—permeates biology. These ubiquitous scaling laws have their origin in the universal properties of the networks that sustain life, such as the cardiovascular and respiratory systems.

Social organizations, like biological organisms, consume energy and resources, depend on networks for the flow of information and materials, and produce artifacts and waste. So it would not be surprising if they obeyed scaling laws governing their growth and evolution. Such laws would suggest that New York, Santa Fe, New Delhi, and ancient Rome are scaled versions of one another in fundamental ways—as, potentially, are Microsoft, Caterpillar, Tesco, and Pan Am.

To discover these scaling laws, Luís Bettencourt at Los Alamos National Laboratory, José Lobo at Arizona State University, Dirk Helbing at TU Dresden, and I gathered data across many urban systems in different countries and at different times, addressing a wide range of characteristics including energy consumption, economic activity, demographics, infrastructure, intellectual innovation, employment of “supercreative” people, and patterns of human behavior such as crime rates and rates of disease spread.

We did indeed find that cities manifest power-law scaling similar to the economy-of-scale relationships observed in biology: a doubling of population requires less than a doubling of certain resources. The material infrastructure that is analogous to biological transport networks—gas stations, lengths of electrical cable, miles of road surface—consistently exhibits sublinear scaling with population. However, to our surprise, a new scaling phenomenon appeared when we examined quantities that are essentially social in nature and have no simple analogue in biology—those associated with innovation and wealth creation. They include patent activity, number of supercreative people, wages, and GDP. For such quantities the exponent (the analogue of ¾ in metabolic rate) exceeds 1, clustering around a common value of 1.2. Thus, a doubling of population is accompanied by more than a doubling of creative and economic output. We call this phenomenon “superlinear” scaling: by almost any measure, the larger a city’s population, the greater the innovation and wealth creation per person.

Organismic growth, constrained by sublinear power-law scaling derived from the dynamics of biological networks, ultimately ceases, with the equations predicting what size organisms will reach. In contrast, our equations predict that growth associated with superlinear scaling processes observed in social organizations is theoretically unbounded. This would seem to bode well for organizations. Unfortunately, however, the equations also predict that in the absence of continual major innovations, organizations will stop growing and may even contract, leading to either stagnation or ultimate collapse. Furthermore, to prevent this, the time between innovations (the “innovation cycle”) must decrease as the system grows.

Lessons?

In some ways, it should seem obvious: if you have more people that can interact in an urban economy, there's more potential for win-win transactions and deeper specialization of labor (and therefore higher productivity). People are more likely to find jobs that better match their skills, education programs to increase their skills, and have greater opportunities for upward social mobility. It's fundamentally why people continue to migrate to cities globally.

The unmentioned factor is transportation mobility. Obviously, to get the benefits of size, you actually have to have the ability to interact with those people (transactions, jobs, etc.), and mobility levels determine whether that's likely or not. As just one example, the average person is willing to commute a half-hour to work, so their job opportunities are limited to that range. The farther they can go in that time, the more opportunities they can access. It also helps to have more people/jobs/density in that commute/mobility/opportunity zone, which is an argument against anti-density regulations or public processes (i.e. "NIMBYs insert sand in gears here").

Cities that try to slow, stop, or restrain growth are ultimately penalizing themselves and their citizens.

Throws some cold water on the idea of smaller, elite, "creative" cities having an advantage over larger metros.

It means growth is also more sustainable and better for the environment, since resource use scales sublinearly with population, i.e. a single metro of 5 million is more resource-efficient than five metros of one million.

So sprawl is ultimately good, because even though it consumes some land and infrastructure resources here, on a net basis, it's ultimately saving more of them from somewhere else. It may not be the best of all possible use of resources, but as long as it represents consolidation from rural and smaller metros to larger metros, it's a net win. And don't forget that the kids of those suburban sprawlers will probably want to live in a dense core (well, at least for a while), so the long-term progression is towards more efficiency.

Obviously, there are some realistic counter-forces at some point - the entire United States is not going to eventually move to New York (and in fact their domestic migration is negative). Human preferences for space, privacy, mobility, affordability, and differing geographies and climates are probably some of the factors that keep that from happening.

This also means we should be more excited than fearful about the prospect of growing to over 8 million people in the metro area over the next 25 years. According to this model, we should end up much better off not just in total, but on a per-person basis. Houston is truly on a trajectory that's just getting better and better.

About Me

Social Systems Architect and entrepreneur with a genuine love of my hometown. I cover a wide range of topics in this blog - including transportation, transit, economic development, quality-of-life, city identity, and development and land-use regulations - and have published numerous Houston Chronicle op-eds on these topics. I'm a Founding Senior Fellow with the Center for Opportunity Urbanism and co-authored the original study with noted urbanist Joel Kotkin and others, creating a city philosophy around upward social mobility for all citizens as an alternative to the popular smart growth, new urbanism, and creative class movements. I am a native Houstonian, 6th-generation Texan, attended Rice University for my BSEE and MBA, and a former McKinsey consultant and adjunct faculty member with Leadership Houston. I am currently the founder of Coached Schooling, pioneering a transformational new approach for a more effective and engaging 21st-century K-12 education combining the best elements of eLearning, home and traditional schooling. CONTACT EMAIL: tgattis (at) pdq.net - send me an email if you would like to receive these posts via email, or see the Google Groups signup box below.